Question

List the four financial statements and explain each one. What does each statement tell us? Provide an example of each statement using the corporation you researched in Week 1 (Wal-Mart). Next, explain the connections between the financial statements.

Answer 1

1	Income statement
	It is a statement prepared by the company to determine the operating result during a particular period. Operating result is equal to operating income minus operating expenses.
	All the revenues will be shown in one side of the starement and all the expenses will be shown on the other side. Then balance it each side, net balance of both the side is called net income or losses. If income side is more, then it is net income position and if expenses side more then it is a net loss position.
2	Statement of owner's equity
	Statement of owner's equity is the statement to find out the ending balance of owner's equity
		$
	Beginning balance of owner's equity	XXXX
	Add/(less): Current year net income /(loss) from income statement	xxxx
	Less: Dividend paid	(xxxx)
	Ending balance of owner's equity	XXXX
3	Balance sheet
	Balance sheet is a report prepared on a particular date which shows the financial position of an entity. This is a two side column statement where the aggregate of assets are in one side and the aggregate of liabilities on the other side. Total of both the side is will be same which shows the financial position.
	Assets;
	Fixed assets
	Current assets
	Investments
	Liabilities;
	Owner's fund
	Long-term loans and advances
	Short-term loans and advances
	Current liabilities and provision
	Ending balance of statement of owner's equity will transfer to the owner's fund under liability side of the balance sheet.
4	Cash flow statement
	It is a statement describes cash inflow and outflow from various activities during the year. Cash flow activities are;
	1. Cash from operating activity
	2. Cash from Financing activity
	3. Cash from Investing activity
	Generally cash flow statements are prepared in two types, one is indirect method and the other one is direct method.
	Under indirect method, cash flow is start with net income from income statement and reversly work out.